#24781-r-SLZ

2008 SD 95

IN THE SUPREME COURT OF THE STATE OF SOUTH DAKOTA

* * * * TOVA L. HEISS, Plaintiff and Appellant,

v. ANDREW J. HEISS, Defendant and Appellee.

* * * *

APPEAL FROM THE CIRCUIT COURT OF THE SIXTH JUDICIAL CIRCUIT STANLEY COUNTY, SOUTH DAKOTA

* * * *

HONORABLE MARK BARNETT Judge

* * * * ROSE ANN WENDELL Attorney for plaintiff Pierre, South Dakota and appellant. DAVID W. SIEBRASSE Attorney for defendant Pierre, South Dakota and appellee.

* * * * CONSIDERED ON BRIEFS ON AUGUST 26, 2008

OPINION FILED 

### 10/08/08-1- #24781 ZINTER, Justice [¶1.] Tova L. Heiss (Tova) appeals fr om a circuit court judgment adopting a referee’s recommendation to reduce Andrew J. Heiss’s (Andrew’s) child support obligation three months after Andrew’s init ial child support order was entered. We

reverse. I [¶2.] Tova and Andrew were married on July 25, 1998. They had two

children. Tova sued Andrew for divorce on December 29, 2006. The parties entered into a stipulation and property settlement agreement that was incorporated into a judgment and decree of divorce dated Marc h 5, 2007. Pursuant to the parties’ stipulation, the decree required Andrew to pay monthly child support of $1,350 commencing March 1, 2007. [¶3.] On June 5, 2007, three months af ter the order, Andrew filed a petition to reduce the child support. Andrew asserted that his income had been reduced and

that he had the children “half the time.” Based on these assertions, he requested that his child support obligation be reduced from $1,350 to $100 per month. [¶4.] On June 26, 2007, Andrew’s re quest was heard befo re a referee. Andrew testified that prior to, during, and after the divorce, he worked for his father’s business, Lucky Seven, Inc., a company that operated a farm and ranch owned by the Lower Brule Sioux Tribe. According to Andrew, his job and income from that employment had changed. Andrew testified that on December 1, 2006, he

became a “ranch hand” instead of “assistant manager.” He also testified that this occupational change resulted in a reductio n in income. According to Andrew, under#24781

-2- the prior arrangement with Lucky Seven, his income was 8% of the net profit

realized from the sale of ca lves born of tribal cows that the corporation managed. After December 1, 2006, he only received a monthly salary of $2,000 per month. His 2006 income tax return did not, however, confirm this claimed reduction, and Andrew did not submit a 2006 W-2 statement for December 2006 confirming the new salary. [¶5.] Andrew’s evidence was also equivocal on other relevant matters. For example, although the referee noted that one paycheck stub reflected that Andrew was paid every two weeks, Andrew deni ed getting paid every two weeks. Additionally, although Andrew testified that he only worked “thirty to forty” hours a week in his new position, his financial statement that accompanied the petition

for modification reflected that he worked sixty hours per week. When asked if his financial statement was incorrect, Andrew responded, “I’m not, yeah, probably, I

don’t know.” [¶6.] Most significantly, Andrew clai med that a substantial portion of his claimed reduction in income was caused by the forced sale of his own cattle due to drought and market conditions. Andrew’s evidence, however, did not reflect that

the bulk of this claimed reduction occurre d after the March 2007 child support order under which he had agreed to pay monthl y support of $1,350. On the contrary,

Andrew testified that the bulk of his own cattle were sold from 2003 through 2006. [¶7.] Andrew also testified that at the time he signed the initial support agreement, he had acquired twenty other cows for his own private investment and that he sold those cows before the hearing. He testified that when he signed the#24781

-3- initial child support agreement, he “thought maybe [the stipulated support of $1,350 a month] would work, I thought mayb e the [twenty] cows that I did own were going to make more money and it didn’t .” He further testified that “in essence, [he] made a bad deal.” Nevertheless, when the referee then inquired whether Andrew’s claimed change in income occurred between the time of the stipulated order (March 5, 2007) and the petition fo r modification (June 5, 2007), Andrew replied, “no, probably not.” [¶8.] Finally, because of further ambiguities regarding tribal cattle, Andrew’s cattle, and the income deri ved from each, the referee requested documentation from Andrew, including a “des cription of all profit , or all proceeds of livestock sales received by [Andrew]” in 2006 and 2007, with a description whether they were his cattle or the Tribe’s cattle. Andrew agreed to supply this information after the hearing, but he failed to do so. At the end of the hearing, the referee, referring to the required showing of a substantial change of circumstances necessary to modify a prior support order, ob served: “at this point, it looks like it is, you know, difficult to come to the point where we should be modifying the results of an agreement that was just [decided] three months ago.” [¶9.] The referee filed his written repo rt on October 1, 2007. He found that Andrew’s current income had been reduced to $2,000 per month. Although he had previously expressed doubt that Andrew sh owed the required substantial change in circumstances, the referee concluded that it was “equitable” to reduce the support because the parties enjoyed a substantial income in prior years, but market forces#24781

-4- and a desire to spend more time with th e children had reduced Andrew’s resources significantly. The referee reasoned: It appears that the parties enjoyed a substantial income in prior years, but that market forces an d a desire to spend more time with his children have reduced [Andrew’s] resources significantly. The South Dakota Supreme Court in Whalen [v. Whalen, 490 NW2d 276 (SD 1992)] indicated that a party was not to be relieved from the consequences of a bad deal, but the court more recently in Dahl [v. Dahl, 2007 SD 64, 736 NW2d 803] has expressed the thought that child support is subject to adjustment as the fortunes of the parties and the situations of the children change[]. It appears equitable under the circumstances to provide relief[.] In accordance with this conclusion, Andrew’s $2,000 monthly salary, and the applicable statutory guidelines, the referee recommended that Andrew’s child support be reduced to $1,026 a month e ffective October 1, 2007, and to $703 a month effective April 1, 2008. Significantly, however, the referee’s comparison of income was based on “prior years,” and he made no finding that there had been a substantial change in income since the March 2007 order. [¶10.] Tova objected to the report. To va argued that a substantial change of

circumstances had not occurred since March 2007, and therefore, Andrew’s child support could not be modified. Tova also ar gued that the evidence of the cattle sales was so ambiguous that it was insufficien t to establish a substantial change in

circumstances. The circuit court overru led those objections and adopted the

referee’s recommendation. Because it is di spositive, we limit ou r discussion to the question whether a substantial change of circumstances occurred after March 2007.#24781

-5- II [¶11.] “[W]hen the [circuit] court adop ts the child support referee’s factual findings and legal conclusions, ‘we apply th e clearly erroneous standard of review to the findings and give no deference to conc lusions of law.’” Kauth v. Bartlett, 2008 SD 20, ¶8, 746 NW2d 747, 750 (citation omitte d). Accordingly, “[f]indings are not

reversed for clear error ‘unless we are left with a definite and firm conviction a

mistake has been made.’” Id. (citation omitted). “The referee’s conclusions of law, however, are freely reviewable and may be overturned whenever they are thought to be incorrect.” Janke v. Janke, 467 NW2d 494, 497 (SD 1991). [¶12.] Andrew’s petition for modifica tion was filed June 5, 2007, which was within three years of his March 5, 2007 st ipulated support order. Therefore, Andrew had the burden of proving that a “substantial change of circumstances” had occurred after March 5, 2007. See SDCL 25-7A-22 (providing that “[t]he order may be modified upon showing a substantial change in circumstances if the petition is filed within three years of the date of th e order [of support]”); Whalen v. Whalen, 490 NW2d 276, 280-81 (SD 1992) (stating: “We have consistently required a party seeking modification of a child support order to demonstrate a change in circumstances occurring since the original child supp ort order was entered.”). [¶13.] Without finding that Andrew had shown a substantial change in circumstances since the March 2007 order, the referee modified Andrew’s child support obligation. The referee noted that Andrew was now making $2,000 per month, and that the parties’ resources we re more substantial in “prior years.” Utilizing that time frame and the parties’ pre-divorce joint income as a comparison,#24781

-6- the referee concluded that “market forces and a desire to spend more time with his children have reduced [Andrew’s] resources significantly” making it “equitable under the circumstances to provide relief[.]” This conclusion incorporates incorrect legal standards in reviewing a request for child support modification under SDCL

25-7A-22. [¶14.] First, with respect to Andrew’s income from employment, his petition and testimony reflected that his job and income had changed on December 1, 2006, well before the stipulated order. Indeed, Andrew concedes in his brief that at the time he signed the original stipulation in March of 2007, his income had already been reduced to the $2,000 monthly salary. Therefore, this reduction in income could not be used to justify a change of circumstances since entry of the initial order of support. See SDCL 25-7A-22. [¶15.] Second, with respect to the cattl e sales, Andrew testified that all but twenty cows were sold due to hard times and drought between 2003 and 2006. Because those sales occurred before the stipul ated order of support, they also should not have been used to justify a substantia l change in circumstances occurring after entry of the order. See id. Concededly, there is some evidence that twenty cows may have been sold after the March orde r of support. Nonetheless, when the referee tried to clarify whether Andrew’s claimed loss of cattle income occurred between signing the stipulation and the time he petitioned for modification, Andrew conceded, “no, probably not.” And most impo rtantly, even if th e twenty cows were sold subsequent to the order, Andrew did not quantify the reduction in investment income that occurred following the loss of that property. Without knowing the#24781

-7- amount of that claimed loss of investment income, Andrew could not prove that it substantially affected his ongoing ability to pay child support. Because Andrew failed to quantify his claimed reduction in investment income resulting from any qualifying post-order sales, he failed to satisfy his burden of proving a substantial change in circumstances resulting from those sales. [¶16.] Andrew finally claimed a change in circumstances due to a change in child visitation. The evidence, however, is undisputed that there was no change in the number of days of visitation: rather , only the days of the week changed. Further, the change in visitation did no t occur until August of 2007, well after the hearing before the referee. Therefore, the change in visitation could not have been a material part of Andrew’s claimed substantial change in circumstances. [¶17.] For the foregoing reasons, we agree with the referee’s initial

observation that “it is . . . difficult to come to the point where we should be modifying the results of an agreement that was just [decided] three months ago.” Our review of the transcript confirms this observation because Andrew did not meet his burden of proving a substantial change in financial condition occurring after the initial child support order. We also observ e that the threshold te st is not whether it is “equitable . . . to provide relief,” bas ed on a reduction of the parties’ income realized in “prior years,” but whether Andrew incurred a substantial change in circumstances in his ability to pay child support since entry of the order. See SDCL 25-7A-22. Although Andrew testified that he thought “maybe [$1,350 a month] could work,” that he was “going to make more money,” but he made a “bad deal” when he signed the order, “courts are not required to relieve parties from such bad#24781

-8- bargains.” Lodde v. Lodde, 420 NW2d 20, 22 (SD 1998) (citing Moller v. Moller, 356 NW2d 909 (SD 1984)). Andrew acknowledges this ru le, but relies on this Court’s later statement that “[a]lthough a stipulat ion may be valid and fair when executed, it may not be later when circumstances change.” Dahl , 2007 SD 64, ¶18, 736 NW2d 803, 807. We acknowledge our statement in Dahl, yet that language must be read as being subject to the statutory requir ement that the change of circumstances

occur after the initial order of support. See SDCL 25-7A-22. [¶18.] In this case, the record reflec ts that the basis for Andrew’s claimed reduction in income either occurred before the prior order of support or was not sufficiently quantified. Additionally, Andr ew failed to prove that the change in

visitation constituted a substantial chan ge in circumstances. Because Andrew

failed to meet the threshold burden of establishing a substantial change of circumstances, we reverse and remand for entry of an order denying his petition.

III [¶19.] Both parties have submitted mo tions for appellate attorney fees. “SDCL 15-26A-87.3 permits an award of a ppellate attorney fees if they are otherwise allowable and if they are accomp anied by a verified, itemized statement of the legal services rendered.” Schaefer ex rel. S.S. v. Liechti , 2006 SD 19, ¶20, 711 NW2d 257, 264. SDCL 15-17-38 authorizes attorney fees in cases involving child support, and both parties have submitted a ve rified, itemized stat ement of fees. As the prevailing party, Tova’s motion is granted in the amount of $2,000. See Toft v. Toft, 2006 SD 91, ¶26, 723 NW2d 546, 554 . Because Andrew has failed to prevail,

his motion is denied. Id. ¶26, 723 NW2d at 554-55.#24781

-9- [¶ 20.] GILBERTSON, Chief Justice, and SABERS, KONENKAMP, and MEIERHENRY, Justices, concur.